Despite a declining health care sector of late, one key analyst sees potential in Community Health Systems Inc. (NYSE: CYH). Ultimately, this analyst continues to believe the valuation looks compelling, and the spin-off of Quorum Health and the recent sell-off are yet further reasons to own this stock.

Oppenheimer believes Community Health offers very attractive value at the stock’s current levels, as the company continues to boast upside from the Affordable Care Act, Health Management Associates (an acquisition) and operational improvements. Furthermore, the firm believes the spin-off of Quorum Health will only help shareholders as the new business will benefit from improved operational focus and attractive merger and acquisition opportunities.

In the first quarter of 2016, the company plans to do a tax-free spin-off of Quorum Health, which includes leading hospital management and consulting business, Quorum Health Resources, and 38 hospitals with 3,587 beds. The Quorum hospitals are more rural focused, with 84% acting as sole providers.

Quorum has a huge opportunity that it should be able to focus more on core operations, particularly with respect to hiring and capital expenditures. However, the most significant opportunity should come from mergers and acquisitions, as Quorum can target smaller and more rural hospitals that Community Health has been forced to pass on, and the Quorum Health Resources business relationships should open up more of these opportunities.

In the report Oppenheimer said:

We also believe that legacy Community Health will be well-positioned for growth, as it sheds some of its lower margin and lower growth businesses. Furthermore, the business should have more opportunity from Medicaid expansion, as Quorum has 74% of its revenues in expansion states (vs 43% overall for Community Health).

Considering the attractive discount at which the company trades, and the opportunity for the spin-off to outperform current expectations, Oppenheimer believes the spin-off is a low-risk maneuver to unlock value. As a result, the firm maintained its Outperform rating and would continue to be buyers.

Shares of Community Health were relatively flat on Tuesday at $41.51. The stock has a consensus analyst price target of $70.76 and a 52-week trading range of $40.52 to $65.00.

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